TOKYO (Reuters) – As winter cold hits China, South Korea and Japan, prices for coal, liquefied natural gas (LNG) and electricity are rising due to tight supply and ‘increased demand with colder weather expected.
China’s benchmark coal is eight-year high and LNG prices have hit six-year highs, pushing up electricity prices in Japan, where limited nuclear capacity leaves the country vulnerable to price volatility fuel.
China is also at risk, as an effective ban on coal imports from Australia pushes up domestic prices.
Qinhuangdao coal prices are 718 yuan ($ 110) per tonne, compared to coal delivered from the Australian port of Newcastle at $ 79.50 per tonne.
Chinese industrial activity returned to pre-coronavirus growth levels in November, increasing energy use 9.4 percent year-on-year to 646.7 billion kilowatt-hours, the National Energy Administration said.
Daily coal consumption at major coal-fired power plants in eight provinces in eastern China increased 6 percent from the corresponding period a year earlier, while coal stocks stood at 85 percent of 2019 levels.
China’s domestic LNG prices also jumped 60% more than last year, according to Sublime China Information.
Wholesale prices at the Chinese manufacturing hub in Jiangsu, Shandong and Zhejiang provinces climbed 40 percent last week to around 7,500 yuan per ton, the consultancy said. China’s LNG imports in December are expected to hit a record high.
Prices for LNG cargoes to be delivered to Asia in January were estimated at around $ 12.70 per million British thermal units (BTUs), or about $ 660 per tonne.
“Cold weather in China and Northeast Asia has … created a surge in demand for heat,” said Robert Sims, research director at Wood Mackenzie.
(Graphic: Cold snap in North Asia drives prices for coal, LNG and jet fuel -)
A year after the onset of the coronavirus pandemic, which crushed the energy market and sent oil prices into negative territory and LNG to record highs, the return of winter weather created new volatility and pushed price on the rise.
Temperatures are expected to be below historical averages in Tokyo, as well as Seoul, Beijing and Shanghai, through the end of the year, according to weather data from Refinitiv, keeping pricing pressure on.
(Graphic: weather forecast Asia -)
Japan is experiencing record snowfall, causing power cuts, stranded villages and increased traffic.
Parts of the country are bracing for up to 80 cm (32 inches) of snowfall as the cold snap hits much of the country.
With only three nuclear reactors in operation and supply interruptions of other fuels, Japan’s regional utilities have transferred electricity between regions to fill the shortages, according to the companies concerned.
“We are ready to take all possible measures to guarantee electricity, including supply to the electricity market,” Takashi Morimoto, chairman of Kansai Electric Power, said on Friday.
(Graph: daily electricity prices in Japan since April 2018 -)
($ 1 = 6.5406 Chinese renminbi yuan)
Reporting by Aaron Sheldrick and Yuka Obayashi in Tokyo, Aizhu Chen and Jessica Jaganathan and Heekyong Yang in Seoul; Editing by Edmund Blair